Private capital is funding Hollywood movies now. The same people who couldn't explain what a bond is are greenlighting scripts. This explains why every streaming service has seventeen identical thrillers about kidnapped daughters.
The big studios used to lose money on movies the old-fashioned way. They'd hire proven directors. Pay actors too much. Market films nobody wanted. Now they're letting hedge fund managers do it faster.
Private equity enters an industry for one reason. Extract value. Sell the copper wiring. Blame the workers. But you can't strip a movie for parts. You can't sell the third act to a pension fund. So they're doing the next best thing. Making films designed by algorithm and tax incentive.
The article says this is changing the types of movies being made. Correct. We're getting more action franchises nobody asked for and fewer mid-budget comedies that might actually turn a profit. Private capital looked at Hollywood's business model and thought, "You know what this needs? Our business model." Breathtaking.
Retail traders will see this headline and think it's a signal. They'll buy shares in whatever production company gets mentioned on CNBC. They'll create a spreadsheet tracking box office opens versus private capital inflows. They'll convince themselves they've found an edge because they saw Oppenheimer twice.
The financing structures are diversifying. That's the phrase they use when nobody wants to admit the old way stopped working. Banks won't lend. Studios won't spend. So private capital steps in with suitcases of money and one request: make it exactly like the last thing that worked.
In five years these same private equity firms will exit their positions. They'll sell to a bigger fund or take the production companies public. Some analyst will write a report about how Hollywood financing has matured. And we'll get another decade of movies designed by people who think Goodfellas is too slow.
At least when the mob ran Hollywood they had taste.
Photo by De'Andre Bush on Unsplash
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